Previous Quarterly Editions
Expropriation Risk: 65 65 65 66 ► Political Violence Risk: 66 66 67 67 ► Terrorism Risk: 65 65 65 67 ▲ Exchange Transfer and Trade Sanction Risk: 73 64 64 55 ▼ Sovereign Default Risk: 66 66 66 66 ►
TREND ►
Government's commitment on climate policy Weakest 1 2 3 4 5 Strongest
Cameroon contributes around 0.25% of global greenhouse gas (GHG) emissions, according to the 2018 World Resources Institute Climate Analysis Indicators Tool. In October 2021, Cameroon submitted the updated version of its 2015 Nationally Determined Contribution (NDC). The current NDC aims to reduce GHG emissions by 35.5% by 2030 including an unconditional target of 12%.
The previous target was to reduce GHG emissions by 32% by 2035. The country’s emission reduction commitments by sector are 5.7% for agriculture, 11.2% for energy, 16.3% for land use change and forestry, and 2.3% for the waste sector. The agriculture sector constitutes the largest source of GHG emissions at 69% of total emissions, while the energy sector comes second at 18%, followed by the waste sector with 12% and the industrial process sector and use of products with 1%.
Cameroon has weak development status and a high level of vulnerability to climate change. The investment needed to implement the NDC actions is estimated at close to USD58 billion, with USD32 billion allocated for adaptation and USD26 billion for mitigation. The government relies on a mix of public and private investment as well as donor support to meet the targeted amount.
Cameroon's installed electricity generation capacity is approximately 1,402 megawatts, 56% of which is from hydropower, 43% from fossil fuels (17.55% from natural gas and 26.29% from oil) and the remaining proportion from solar photovoltaic. So far, only a very limited percentage of the country’s renewable energy potential is exploited. With the exception of hydropower, renewable energy contributes less than 1% to the country's energy mix. The government aims to increase this to 25% by 2035.
The government has taken steps to increase renewable energy with the signing of an agreement with the Bank of China for a CFA74 billion (USD123.2 million) loan to finance Phase II of the solar rural electrification programme launched by the government and China’s tech giant firm Huawei in November 2016. There are other hydropower projects including the Nachtigal hydropower project and the Grand Eweng hydro project, and a USD3 billion hydroelectric facility plan to transform Cameroon into an electricity exporter by 2035.
Overall, other policy objectives will be accorded roughly equal treatment to climate by the government. However, the government’s focus will be skewed to hydropower at the expense of other forms of renewable energy.
TREND ► Incidents of expropriation are few and, when they occur, mainly relate to infrastructure projects. In most instances, the government uses threat of contract cancellation to put pressure on contractors for timely delivery. For instance, a formal warning of contract cancellation was served by the government to Chinese construction firm Sinohydro for its delays in the construction of a new headquarters for the Ministry of Public Works and the rehabilitation of some roads.
President Paul Biya is serving his seventh term following his re-election in November 2018. In power since 1982, 89-year-old Biya’s political longevity comes from his ability to consolidate power and maintain control over state institutions and the military. The president is showing no sign of stepping down and is eligible to run again in 2025, as the 2008 constitutional amendment removed term limits.
Without a clear successor to Biya, a sudden Biya departure is almost certain to trigger a succession battle within the ruling Cameroon People's Democratic Movement (CPDM). This could cause policy paralysis and severe disruption to executive branch operations. A messy transition could lead to a military intervention.
Yet Biya’s administration remains firmly in control, including occupying 148 of the National Assembly’s 180 seats and 81 of the 100 Senate seats. Meanwhile, Biya’s CPDM party also won nine of the ten administrative regions after the first ever regional elections were organised in December 2020. However, those elections were boycotted by the two main opposition parties, the Cameroon Renaissance Movement (CRM) and the Social Democratic Front (SDF).
The insurgency in the Anglophone regions, which account for 20% of the country’s 24 million inhabitants, has led to more than 3,000 deaths, while 700,000 people are displaced and 860,000 are children out of school since the insurgency started in 2017. Biya has made some overtures in search of a settlement to the conflict, including granting a ‘special status’ in December 2019 to the two Anglophone regions and holding the regional elections to elect regional councils. However, these moves have fallen short of pursuing a significant reform, including the full implementation of the decentralisation of the decision-making process that will empower the regional governors. Moreover, the outcome of the regional election has only reinforced Anglophone leaders’ belief the government is not genuinely committed to relinquishing some powers.
TREND ▲
Nigeria-based Islamist group Boko Haram and its offshoot, Islamic State of West Africa Province (ISWAP), have escalated their attacks in Cameroon’s north, where they have been waging an armed campaign since 2014. Islamist militants stage attacks in the Far North region using improvised explosive devices and suicide bombers. However, the Islamist groups have yet to expand their attacks beyond this region.
In the south, separatist militants are engaging in indiscriminate attacks on civilian and military targets, burning public infrastructure, including schools, markets and post offices. Increasingly, the Anglophone militants appear to be copying Boko Haram’s tactics, including targeting school children, using improvised explosive devices and kidnapping civilians, state officials and local businesspeople for ransom, to raise funds and recruit new members. Nonetheless, collaboration between Anglophone militants and Boko Haram remains unlikely given their differing religious beliefs and ideology.
TREND ▼
As a member of the Central African Economic and Monetary Community (CEMAC), Cameroon is bound by the foreign exchange regulations and directives emanating from the bloc’s Central Bank of Central African States (BEAC). The bank introduced a new foreign currency exchange regulation (which took effect on March 1, 2019) to regulate foreign exchange transaction in the bloc’s six member states.
The new foreign exchange regulation has significant implications for commercial transactions and raises a variety of risks, including onshore bank credit risk, exchange rate, convertibility and transferability risks. The regulation requires companies to seek authorisation from BEAC before opening offshore current accounts and to renew the permission to maintain foreign currency accounts in the CEMAC region every two years.
However, the Central Bank has granted several concessions to resident companies operating in the mining and hydrocarbons sectors as the new foreign exchange regulation came into effect on January 1, 2022 for the extractive sector. These concessions significantly reduce the risk of capital control and exchange transfer for the extractive industry, a major revenue earner for CEMAC countries. Extractive companies can maintain foreign currency accounts both in and outside the CEMAC region and can transfer abroad the salary of expatriate workers from onshore foreign currency accounts, while payment can be made in foreign currency to subcontractors operating in the CEMAC zone.
Cameroon’s sovereign default risk has lowered. The country’s economy is expected to grow further following the 2020 contraction, its first in a decade. The government projects 4.2% economic growth in 2022. However, this estimate was before the dramatic rise of the global price of crude oil, which could significantly boost public revenue.
In February 2022, Finance Minister Louis Paul Motaze announced a government plan to keep public debt below 50% of gross domestic product (GDP) in the 2022 fiscal year. Generally, Cameroon’s public debt is well below the CEMAC region’s limit of 70% debt-to-GDP. Cameroon benefits from the G20 Debt Service Suspension Initiative (DSSI), enjoying a moratorium on non-commercial debt service until December 2021, though it seems unlikely to be extended further. In late March, the government signed an agreement with Japan to extend further its debt service moratorium within the DSSI framework until June 2022.
The moratorium brings much-needed relief to public finances and mitigates any short-term risk of sovereign default by the government. The government has also reached a preliminary agreement with the International Monetary Fund to restart a new economic and financial programme following the expiration of the last one (2017-20), amounting to about XAF400 billion (USD736 million). Furthermore, local media reported the government was considering as one option to refinance its 2015 Eurobond, whose amortisations are scheduled to start in 2023.
Return to contents Next Chapter
